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Identifying stocks with earnings certainty

Livewire Exclusive

Livewire Markets

Sam Ferraro from independent research firm Evidente has developed a model for identifying stocks that provide a high degree of earnings certainty. He believes that against a backdrop of ultra low interest rates and low growth it will be companies that offer investors a high level of confidence around their earnings that will continue to perform relatively well. The model encompasses factors such as a stocks beta (i.e. how correlated it is to the broader market), return volatility, dispersion of analyst forecasts and the stability of EPS. In this video Ferraro explains the process for his model and highlights the top and bottom ranked large cap stocks in his model as well as a pocket of small cap stocks where he believes there is a level of complacency when it comes to earnings certainty.

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